Before the
Federal Communications Commission
Washington, D.C. 20554
In the Matter of )
)
Requests for Waiver )
of Section 24.711(b)(3) of the )
Commission's Rules Establishing )
the Interest Rate on Installment)
Payments for C Block PCS Licensees)
ORDER
Adopted: May 18, 1998 Released: May 18, 1998
By the Chief, Wireless Telecommunications Bureau:
1. The Wireless Telecommunications Bureau ("Bureau") of the Federal Communications
Commission ("Commission") has before it several requests for waiver of the Commission's rules imposing a 7
percent interest rate on eligible broadband PCS C block licensees whose licenses were conditionally granted on
September 17, 1996, and that elected to utilize the Commission's installment payment plan. Because these
requests address the same issue, we have opted to resolve this matter in one order, rather than in individual orders.
For the reasons discussed below, the requests for waiver are hereby denied.
2. Background. On May 6, 1996, the Commission concluded the broadband PCS C block auction.
Pursuant to Section 24.711(b) of the Commission's rules, winning C block bidders that qualified as small
businesses were permitted to pay for their licenses in installment payments over the course of their license term.
In particular, Section 24.711(b)(3) provides that interest on installment payments "shall be imposed based on the
rate for ten-year U.S. Treasury obligations applicable on the date the license is granted." This rate is determined
based upon the interest rate in the most recently-completed Treasury note auction prior to the license grant date,
where the Treasury note term is equivalent to the term of the installment plan. Under Section 24.711(b)(3), for
C block licenses conditionally granted on September 17, 1996, the applicable interest rate is 7 percent, while
some licenses conditionally granted after the September 17 date are subject to a 6.5 percent interest rate.
3. Subsequent to September 17, 1996, several C block licensees whose licenses were conditionally
granted on that date filed requests for waiver of the 7 percent interest rate applicable to their installment payment
plans. Specifically, these parties argue that unique facts associated with the August, 1996 U.S. Department of
Treasury Auction make a waiver of Section 24.711 appropriate, and that the interest rate applicable to their
installment payments should be reduced to 6.5 percent.
4. During the spring of 1997, the Commission also received several requests, from both C and F
block PCS licensees, for other types of relief associated with the installment payment program. On March 31,
1997, in response to a joint request from several C block licensees seeking to modify their installment payment
obligations, and because of other debt collection issues, the Bureau suspended the deadline for payment of
installment payments for all C block licensees. On April 28, 1997, the Bureau extended the suspension to F
block licensees.
5. In a Public Notice released on June 2, 1997, the Bureau sought comment on all aspects of the
requests for waiver of the 7 percent interest rate discussed above. In addition, the Bureau sought comment on
whether, if it determined that a waiver of Section 24.711(b)(3) were appropriate, such relief should be granted
to all similarly situated parties, whether or not they have filed a request for waiver. The Bureau received
approximately 21 comments and 2 reply comments in response to the Interest Rate Public Notice. The majority
of commenters -- mostly C block licensees whose licenses were granted on September 17, 1997 -- support a
waiver of the 7 percent interest rate, and suggest that any relief granted should be extended to all licensees whose
licenses were granted on September 17, 1996, whether or not they have filed a request for waiver. In contrast,
three commenters oppose any waiver of the 7 percent interest rate.
6. Also on June 2, 1997, the Bureau issued a public notice seeking comment on the proposals from
C block licensees regarding alternative financing arrangements and a petition for rule making regarding the issue
of broadband PCS C block installment payments. On September 25, 1997, after consideration of the extensive
record in that proceeding, the Commission adopted a Second Report and Order and Further Notice of Proposed
Rule Making in which it created a menu of options to assist C block licensees experiencing financial difficulties
under their installment payment obligations. In addition, the Commission ordered a resumption of installment
payments for C and F block licensees, effective March 31, 1998. The Commission noted that requests for waiver
of the 7 percent interest rate were pending and directed the Bureau to resolve these requests for waiver in a
manner consistent with the Commission's decision in the Second Report and Order and Further Notice of
Proposed Rule Making. On reconsideration, the Commission adopted several modifications to the Second
Report and Order and Further Notice of Proposed Rule Making, including a postponement of the payment
resumption date, which is now July 31, 1998. The Commission also noted that the Bureau would address the
interest rate issue in a forthcoming order.
7. Discussion. Section 24.711(b)(3) of the Commission's rules provides that, for small businesses,
interest on installment payments "shall be imposed based on the rate for ten-year U.S. Treasury obligations
applicable on the date the license is granted." For licenses conditionally granted on September 17, 1996, the
applicable interest rate is 7 percent. However, as indicated above, due to varying factors used to establish
Treasury note obligations, some licenses granted after the September 17 date are subject to a 6.5 percent interest
rate. Those parties that seek a waiver of Section 24.711(b)(3) argue that imposing an interest rate equal to 7
percent frustrates the intent of the Commission's designated entity provisions. They also argue that the
Commission's straightforward application of its rules in this instance is inequitable, arbitrary, and unduly
burdensome.
8. A waiver of the Commission's rules is appropriate only when a party demonstrates either "that
the underlying purpose of the rule will not be served, or would be frustrated, by its application in a particular case,
and that grant of the waiver is otherwise in the public interest," or "that the unique facts and circumstances of a
particular case render application of the rule inequitable, unduly burdensome or otherwise contrary to the public
interest." The Bureau finds that these parties have failed to demonstrate that the underlying purpose of the rule
would be served or that unique circumstances warrant a waiver of Section 24.711(b)(3).
9. The Commission adopted the procedures for determining the interest rate applicable to
installment payments in the Competitive Bidding Second Report and Order, in which it determined, after notice
and comment, that interest imposed on installment payments should be equal to the rate for U.S. Treasury
obligations of maturity equal to the license term, and that the applicable interest rate should be "determined and
fixed at the time of licensing." Since adoption of the Competitive Bidding Second Report and Order, the
Commission has conducted 16 spectrum auctions, several of which have included an installment payment
program for small businesses. In each of these instances, the interest rate on installment payments has been
established pursuant to provisions similar to those set forth in Section 24.711(b)(3). Significantly, winning
bidders in other auctions typically have been subject to different rates of interest on installment payments
resulting from different license grant dates (and thus, different treasury auctions). Section 24.711(b)(3)
explicitly provides for situations where the interest rate will vary, and petitioners have not presented a unique set
of facts convincing us to make an exception to that rule.
10. The parties seeking a waiver of Section 24.711(b)(3) have failed to demonstrate how this
underlying purpose of the rule would not be served, or would be frustrated, by imposing an interest rate on their
installment payments in the manner prescribed under the Commission's rules. In adopting its installment
payment program, including rules for establishing the interest rate applicable to installment payments, the
Commission indicated that its primary purpose was to address the inability of small businesses to obtain private
financing and to enable such entities to compete more effectively for spectrum being auctioned. Although the
Bureau recognizes that petitioners and some commenters point to varying market factors affecting the August
1996 Treasury auction, the Bureau does not find such arguments applicable. While straightforward application
of the rule in this instance results in a different interest rate for petitioners than other licensees in the same service,
such a result is contemplated under the terms of the rule. It is important that the rule provide a fair and clear
standard for establishing interest rates. The Bureau believes it does so, and that petitioners assumed the risk that
different interest rates would be applied based on the date of licensing. By way of comparison, other government
loans are subject to varying interest rates based on timing and market conditions.
11. Moreover, the Bureau finds that petitioners' argument is largely self-serving. If petitioners
believe that all licensees' installment plan notes should be subject to the same rate, the logical time to set the rate
would be at the earliest license grant date of September 17, 1996. Under such a system, all notes would be
subject to the 7 percent rate assigned to petitioners' notes. For all these reasons, the Bureau also finds that
petitioners' arguments fail under the standards set forth in Wait Radio v. FCC, which establish a significant
burden for parties seeking to compel an agency to deviate, in a specific instance, from rules and procedures which
have been tested and applied uniformly in the past.
ORDERING CLAUSES
12. For the reasons set forth above, the requests for waiver of Section 24.711(b)(3) filed by
Omnipoint Corporation, Alpine PCS, Communications Venture PCS Limited Partnership, Comscape
Telecommunications of Charleston License, Inc., DiGiPH PCS, Inc., Eldorado Communications, L.L.C., Horizon
Infotech, Inc., KMtel, L.L.C., Mercury PCS, L.L.C., Miccom Associates, Northern Michigan PCS Consortium,
L.L.C., PCSouth, Inc., Quantum Communications Group, Inc., Savannah Independent PCS Corp., SouthEast
Telephone, Ltd., Southern Wireless, L.P., Wireless 2000, Inc. ARE HEREBY DENIED.
13. This action is taken pursuant to delegated authority as set forth in 47 U.S.C. 155(c) and 47
C.F.R. 0.331. See also Amendment of the Commission's Rules Regarding Installment Payment Financing for
Personal Communications Services (PCS) Licensees, Second Report and Order and Further Notice of Proposed
Rule Making, WT Docket No. 97-82, 12 FCC Rcd 16,436 (1997) at n.34.
FEDERAL COMMUNICATIONS COMMISSION
Daniel B. Phythyon
Chief, Wireless Telecommunications Bureau
APPENDIX
Parties Filing Comments
Airadigm Communications, Inc. ("Airadigm")
Comscape Telecommunications of Charleston License, Inc. ("ComScape")
DiGiPH PCS, Inc. ("DiGiPH")
Eldorado Communications, L.L.C., KMtel L.L.C., Mercury PCS L.L.C., and Miccom
Associates ("Eldorado")
Fortunet Communication, L.P. ("Fortunet")
Indus, Inc, and Chase Telecommunications, Inc. ("Indus and ChaseTel")
Integrated Communications Group Corporation ("Integrated")
Kansas Personal Communication Services, Inc. ("KPCS")
Vincent D. McBride ("McBride")
Morris Communications, Inc. ("Morris")
National Association of Black-Owned Broadcasters, Inc. ("NABOB")
National Telephone Cooperative Association ("NTCA")
NextWave Telecom, Inc. ("NextWave")
Pinnacle Telecom, L.P. ("Pinnacle")
Pioneer Telephone Association, Inc. ("Pioneer")
Rural Telephone Finance Cooperative ("RTFC")
September 17 Alliance ("Alliance")
Sprint Spectrum, L.P. ("Sprint")
Urban Communicators PCS Limited Partnership ("Urban Comm")
Quantum Communications Group, Inc. ("Quantum")
Wireless 2000, Inc., Northern Michigan PCS Consortium, L.L.C., PCSouth, Inc., and Communications
Venture PCS Limited Partnership ("Wireless 2000")
Parties Filing Reply Comments
Omnipoint Corporation ("Omnipoint")
Savannah Independent PCS Corporation, Brookings Municipal Utilities, PVT Wireless Limited
Partnership, PCS Plus, L.L.C., Southwestern Minnesota PCS Limited Partnership, Western Minnesota
PCS Limited Partnership, North Dakota PCS Limited Partnership, and Horizon Personal
Communications, Inc. ("Joint C block Applicants").